Your KPIs Might Be Lying To You

Show Notes

Not all KPIs tell the truth. In this episode of Handled It, Joe Perkins, Brent Hillabrand, and Justin Benson sit down with Adam Flood, Executive Director of Supply Chain at Wellstar Health, to break down the metrics that feel right but lead operations in the wrong direction. From cost-per-pick and fleet utilization to fill rates and incentive pay structures, this conversation exposes how chasing the wrong numbers creates misalignment, gaming, and downstream damage to the customers you're trying to serve.

Adam brings real-world examples from healthcare supply chain, including how switching from pallets to carts saved frontline staff 90 minutes a day. He also introduces the concept of the "feel rate": not just whether you filled the order, but whether the customer actually felt it. The group also digs into Goodhart's Law, leading vs. lagging indicators, how to build empowered teams that drive their own metrics, and why simplifying your dashboard may be the most powerful operational move you make.

What you’ll learn:

• Why cost-per-pick, fill rate, and fleet utilization can mislead more than they reveal

• How lagging indicators create reactive, firefighting cultures

• What the "feel rate" is and why it matters more than fill rate

• How to stop putting ceilings on your team by over-prescribing KPIs

• Why Goodhart's Law says when a measure becomes a target, it stops being a good measure

• How to tailor dashboards for different levels of your organization

Key Moments:

00:00 – The KPI illusion: Why your dashboard might be lying to you

02:00 – The most dangerous KPI: Why cost per pick can hurt your operation

03:30 – Leading vs. lagging indicators: Are you measuring the right things?

06:00 – When measuring the wrong metric creates the wrong behavior

08:00 – The customer impact you never measured: Saving 90 minutes a day

10:30 – A simple change that doubled warehouse productivity overnight

14:30 – Great leaders empower teams instead of chasing metrics

19:00 – The first thing to look for when you walk into any operation

20:30 – "Feel rate" vs. fill rate: The KPI your customers actually care about

31:00 – Goodhart’s Law: Why chasing numbers makes performance worse

Transcript

Every operation runs on numbers:

Cost per pick. Fill rate. Inventory accuracy. Utilization. Productivity. Throughput.

These metrics appear on dashboards, drive leadership discussions, and influence everything from daily operational decisions to long-term capital investments. Organizations rely on them to measure success, identify opportunities for improvement, and evaluate whether the business is moving in the right direction.

But what if the numbers you're reporting each week are telling a different story compared to what's actually happening on the shop floor?

The reality is that metrics are only as valuable as the behaviors they encourage. A dashboard can accurately report improving performance while employees struggle with inefficient processes, customers experience inconsistent service, and leaders unknowingly reinforce habits that work against the organization's long-term goals.

The problem isn't measurement itself. Measuring performance is essential for continuous improvement. The challenge is that organizations sometimes become so focused on improving a particular KPI that they lose sight of what the metric was intended to accomplish in the first place.

When that happens, success on paper doesn't always translate into success in practice.

High-performing organizations understand that KPIs should do more than report results. They should help leaders understand whether the operation is creating better outcomes for employees, customers, and the business as a whole.

Because the most important question isn't whether a number improved, it’s whether the operation improved along with it.

Every KPI Creates Behavior

Most leaders think of KPIs as scorecards.

In reality, they're much more powerful than that.

Every metric communicates what an organization values. The moment leadership begins measuring something consistently, people naturally begin paying attention to it. Teams adjust their priorities. Managers change how they coach. Employees make decisions based on what they know will be discussed in meetings and evaluated during performance reviews.

Over time, those measurements begin shaping behavior just as much as they measure it.

That's why KPIs should never be viewed as neutral.

A well-designed metric reinforces the behaviors that lead to better customer experiences, stronger operational performance, and sustainable growth. A poorly designed metric can encourage shortcuts, create unintended consequences, and shift attention away from what actually matters.

One example discussed during the conversation came from Carolina Handling's own service organization. Leadership placed significant emphasis on reducing the number of open work orders, believing it would improve responsiveness and efficiency. Instead, technicians simply became more selective about opening work orders in the first place. The metric improved, but the underlying objective of serving customers more effectively did not. The organization had unintentionally rewarded the wrong behavior.

The same principle applies across many industries.

A warehouse measured primarily on cost per pick may encourage employees to work faster at the expense of quality. A sales organization rewarded only for revenue may prioritize closing deals instead of solving customer problems. A manufacturing operation focused solely on output may unintentionally sacrifice safety or product consistency.

In each case, employees aren't trying to undermine the business.

They're responding to the signals leadership has given them.

That's why effective leaders don't simply ask how to improve a KPI.

They ask a much more important question:

What behavior is this metric encouraging?

If improving the metric also improves the customer experience, strengthens the operation, and supports long-term success, the KPI is likely measuring something meaningful.

If improving the metric creates new problems somewhere else in the organization, it may be time to rethink what is being measured.

Because every KPI tells people what success looks like, and the best leaders make sure those signals point everyone in the right direction.

When Good Metrics Create Bad Decisions

Most organizations don't intentionally create bad processes.

They don't set out to frustrate employees, reduce customer satisfaction, or make poor business decisions.

Instead, they often find themselves chasing a metric that appears to represent success, without realizing the unintended consequences that metric may be creating.

One of the biggest dangers of KPIs is that they can encourage people to optimize for the measurement rather than the mission. Teams naturally focus on what leadership asks about most often. If meetings revolve around productivity, productivity becomes the priority. If compensation is tied to revenue, revenue becomes the priority. If reducing cost per pick is the primary objective, employees will naturally look for ways to lower that number.

The challenge is that operations are complex systems. Improving one metric rarely happens in isolation. Every decision has downstream effects that may not be immediately visible on a dashboard.

Cost per pick is a perfect example.

On the surface, reducing the cost of picking an order seems like a worthwhile objective. Greater efficiency should lead to lower operating costs and higher profitability. However, if associates begin rushing through orders simply to improve productivity, the organization may unknowingly increase picking errors, create additional rework, compromise safety, or negatively impact the customer experience.

The KPI improves.

The operation doesn't.

During the discussion, the panel shared another example from Carolina Handling's own service organization. Leadership had placed significant emphasis on reducing the number of open work orders. The intention was to improve responsiveness and keep work flowing efficiently.

Instead, technicians simply became more selective about opening work orders.

The metric looked better because fewer work orders were being created, but customers weren't necessarily receiving better service. In fact, the organization realized the behaviors it had unintentionally encouraged were working against the very outcome it was trying to achieve.

The same principle extends well beyond service operations.

Sales teams may chase revenue while overlooking customer relationships.

Manufacturing teams may maximize output while sacrificing quality.

Distribution centers may prioritize speed while increasing mistakes.

Each department appears successful when viewed through its own KPI, yet the overall operation becomes less effective.

This is why experienced leaders rarely evaluate a metric by itself.

Instead, they ask a broader question:

What impact is this metric having on the rest of the operation?

A meaningful KPI should encourage behaviors that strengthen the business as a whole, not just improve one department's performance.

When leaders focus exclusively on moving a number, they risk rewarding activity instead of progress.

When they focus on improving the underlying process, the right metrics often improve on their own.

Ultimately, KPIs should be viewed as indicators—not objectives.

The objective is building an operation that consistently delivers value to customers, supports employees, and creates sustainable long-term performance.

The numbers should simply confirm that you're moving in the right direction.

Leading Indicators Drive Better Decisions

Not all KPIs are created equal.

Some tell you what has already happened.

Others help you influence what happens next.

Understanding the difference between these two types of metrics is one of the most important shifts an operational leader can make.

Lagging indicators measure outcomes that have already occurred. Revenue, profit, productivity, fill rate, and customer satisfaction all provide valuable insight into past performance. They help organizations understand whether goals were achieved, but they offer little opportunity to change the outcome once the numbers have been reported.

Leading indicators, on the other hand, focus on the activities and behaviors that create those results.

Instead of asking, "What happened?" they ask, "What are we doing today that will influence tomorrow's performance?"

Many organizations spend significant time reviewing revenue, throughput, or completed orders. Those metrics certainly matter, but they're the result of hundreds of decisions that were made days, weeks, or even months earlier.

The more valuable question is:

What activities are creating those results?

At Carolina Handling, that means measuring customer engagements, conversations, and solution discovery rather than simply tracking revenue at the end of the sales funnel. Strong customer engagement creates opportunities to understand operational challenges, recommend the right solutions, and ultimately generate sustainable growth. Revenue becomes the result of consistently doing the right things, but it’s not the sole objective.

This way of thinking changes how leaders approach performance.

Rather than waiting for a KPI to decline before taking action, they begin monitoring the behaviors that influence that KPI long before it becomes a problem.

Instead of reacting to poor customer satisfaction scores, they evaluate communication, inventory accuracy, and fulfillment processes.

Instead of responding to declining productivity, they examine training, workflow design, and employee engagement.

Instead of asking why revenue slowed, they look at the quality and quantity of customer interactions happening every day.

Leading indicators don't eliminate problems, they simply provide leaders with an opportunity to address those problems before customers experience the consequences.

The strongest organizations understand that successful operations aren't built by reacting faster.

They're built by recognizing the signals that allow them to act sooner.

That's why the most effective dashboards don't just report the past, they help leaders shape the future.

Your Customer Doesn't Experience Your Dashboard

One of the biggest challenges with operational metrics is that they often reflect internal performance rather than customer experience.

A dashboard may indicate that an operation is running efficiently: Productivity is up. Costs are down. Fill rates are meeting expectations. From a leadership perspective, everything appears to be moving in the right direction.

But customers don't experience dashboards, they experience the results of the processes behind them.

One of the most compelling examples shared during the conversation came from healthcare distribution. A warehouse had implemented a process that made perfect sense from an operational standpoint. Supplies were staged on reusable plastic pallets before being shipped to hospitals. The approach reduced waste, simplified transportation, and aligned with several internal performance metrics.

Inside the distribution center, the process looked like a success.

Once those shipments reached the hospital, the story changed.

Hospital staff had to unload every pallet, transfer supplies onto carts, and then transport them throughout the facility. What appeared to be an efficient warehouse process created nearly 90 minutes of additional work each day for the people receiving the shipments.

The warehouse had optimized its own operation, but it hadn't optimized the customer's operation.

Once the team recognized the downstream impact, they redesigned the process by staging supplies directly onto carts instead of pallets. The change allowed deliveries to move seamlessly from the truck to the hospital floor, eliminating unnecessary handling and giving valuable time back to healthcare workers.

The lesson extends far beyond healthcare. Every organization has internal metrics that measure efficiency, productivity, or utilization. Those numbers provide valuable insight into how the business operates, but they don't always reflect how customers experience the service being delivered.

A company may report a 99.9% fill rate, yet customers still feel like orders are incomplete.

Response times may meet internal service-level agreements, while customers perceive support as slow.

Inventory accuracy may be exceptionally high, but if products aren't available when customers need them, the metric loses much of its value.

That's why the discussion introduced a powerful way of thinking about performance: customer feel rate.

Traditional fill rate asks whether an order was fulfilled.

Customer feel rate asks a different question:

Did the customer receive what they needed, when they needed it, in a way that helped them succeed?

The distinction may seem subtle, but it fundamentally changes how leaders evaluate success.

The best operations don't optimize processes simply because they improve internal KPIs.

They optimize processes because they create better experiences for the people they serve.

When customer outcomes become the standard, the right operational metrics naturally follow.

It's important to remember that customers aren't evaluating your dashboard, they're evaluating your operation.

The Danger of Measuring the Wrong Things

Not every KPI deserves equal attention.

Some metrics provide valuable insight into operational performance. Others can create a false sense of confidence if they're viewed without context. While no KPI is inherently bad, certain measurements become dangerous when leaders begin optimizing for the number instead of the outcome it represents.

One example discussed was equipment utilization.

At first glance, high utilization appears to be a sign of success. Assets are being used efficiently, equipment isn't sitting idle, and resources are generating value. But utilization doesn't tell the whole story.

An organization can increase utilization simply by reducing the amount of equipment it has available. The percentage looks better, yet the business may have less flexibility to respond when customer demand increases. What appears to be improved efficiency today can limit growth opportunities tomorrow.

Fill rate presents a similar challenge.

Many organizations proudly report fill rates approaching 100 percent. On paper, that sounds like exceptional performance. However, high fill rates don't automatically translate into satisfied customers. Products may be available, but not delivered when they're needed. Orders may be technically complete while still creating unnecessary work for the customer after arrival.

A strong metric doesn't always mean a strong customer experience.

The same thinking applies to acquisition cost and labor rates.

Organizations often make purchasing decisions based on the lowest upfront cost, believing they're improving financial performance. Yet the true cost of a piece of equipment or a system extends well beyond its purchase price. Reliability, maintenance, uptime, productivity, and long-term operating costs all influence the total value that the investment delivers.

Focusing solely on acquisition costs can lead organizations to save money today while spending significantly more over the life of the asset.

This is why experienced leaders avoid evaluating any KPI in isolation.

Every metric should prompt additional questions.

What behaviors is this measurement encouraging?

What unintended consequences could it create?

Does improving this number actually improve the customer experience?

How does it affect the rest of the operation?

The most effective operational leaders recognize that dashboards are tools for asking better questions, not simply reporting better numbers.

When metrics are viewed as conversation starters rather than final answers, they become far more valuable.

Because the goal isn't to create impressive dashboards, it's to create an operation that consistently delivers better outcomes.

And sometimes that requires looking beyond the number everyone else is celebrating.

Better Systems Create Better Results

One of the most common mistakes organizations make is assuming that better performance comes from setting higher targets. For example: 

Increase productivity by 10 percent.

Reduce costs by 5 percent.

Or, hit a new throughput goal.

While goals can provide direction, they don't necessarily improve performance on their own. In many cases, simply asking people to work harder or faster does little to address the underlying challenges preventing better results.

High-performing organizations take a different approach.

Rather than focusing exclusively on the number, they focus on improving the system that produces it.

When the system improves, the metrics often improve naturally.

During the discussion, one example stood out as a powerful reminder of what's possible when leaders prioritize innovation over arbitrary targets. A partnership with a team of engineering students from Georgia Tech challenged an existing picking process and looked at it through a completely different lens. Instead of accepting the current workflow as "good enough," the team identified an opportunity to redesign how labels were printed during the picking process.

The results were immediate.

An area that had been averaging approximately 35 lines per hour more than doubled its productivity on the first day of implementation. At times, team members achieved nearly three times their previous output.

Perhaps the most interesting part of the story wasn't the improvement itself.

It was the realization that no one had placed a limit on what success looked like.

If leadership had simply set a goal of improving productivity by 10%, the team might have stopped once they reached it. Instead, they were given the freedom to rethink the process entirely, allowing performance to exceed expectations.

The lesson extends well beyond warehouse operations.

Too often, organizations become attached to incremental improvements because they're familiar and measurable. Continuous improvement is valuable, but leaders must also create opportunities to question long-standing assumptions and explore entirely new ways of working.

Sometimes the greatest gains don't come from doing the same process a little better.

They come from designing a better process altogether.

Creating that kind of environment requires trust.

Employees need the confidence to experiment with new ideas, challenge existing workflows, and occasionally fail while searching for better solutions. Leaders who encourage curiosity and problem-solving often uncover opportunities that dashboards alone would never reveal.

At its core, operational excellence isn't about asking people to hit bigger numbers.

It's about giving them the tools, processes, and support to achieve results they didn't think were possible.

Sustainable improvement doesn't begin with a new KPI, it begins with a better system.

Simpler Dashboards Create Better Decisions

As organizations grow, so do their dashboards.

New reports are created. Additional metrics are added. More charts, graphs, and scorecards begin filling leadership meetings, each intended to provide another layer of insight into the operation.

The assumption is simple: more information leads to better decisions.

In reality, too much information can make it harder to identify what actually matters.

When leaders attempt to measure everything, they often create unnecessary complexity. Teams spend more time reporting performance than improving it, and important insights become buried beneath dozens of metrics competing for attention.

The conversation highlighted an important distinction: every level of an organization requires different information to make good decisions.

Frontline associates don't need executive dashboards filled with long-term financial trends. They need simple, actionable metrics that help them succeed during today's shift. Work in process, remaining order volume, or productivity against the day's workload provides immediate feedback they can act on.

Executives, on the other hand, need a broader view. Their focus is understanding long-term performance, identifying trends, allocating resources, and making strategic decisions that shape the future of the business. They don't necessarily benefit from reviewing every operational detail occurring throughout the day.

Providing the right information to the right audience helps every level of the organization stay focused on what they can actually influence.

The discussion also explored another unintended consequence of excessive measurement.

When employees are overwhelmed with metrics, those measurements can begin acting as limitations instead of motivators. Rather than encouraging innovation, too many targets can cause people to focus solely on meeting the minimum expectations.

Instead of asking, "How much better can we become?" they begin asking, "What number do I need to hit?"

That subtle shift changes how people approach improvement.

The strongest organizations use KPIs to create clarity, not confusion.

They identify the handful of measurements that truly reflect operational health, communicate them consistently, and ensure every metric connects back to the organization's larger goals. When everyone understands what success looks like and why it matters, teams spend less time chasing numbers and more time improving the work itself.

Ultimately, dashboards should simplify decision-making, not complicate it.

The goal isn't to measure everything.

The goal is to measure what matters most.

Goals Should Guide Behavior, Not Limit It

Setting goals is an important part of every successful operation.

Goals provide direction, establish priorities, and give teams something to work toward. Without them, continuous improvement becomes difficult to sustain.

However, goals can also become counterproductive when organizations focus too heavily on the number itself.

One of the concepts discussed during the episode was Goodhart's Law, the idea that once a measure becomes a target, it often stops being a good measure. In other words, when people become singularly focused on achieving a specific metric, they naturally begin finding ways to optimize for that number, even if it doesn't improve the overall operation.

The challenge isn't goal setting.

The challenge is how leaders use those goals.

A helpful comparison came from youth baseball.

Coaches don't simply tell players to win games. They don't expect athletes to become better by repeatedly reminding them of the final score. Instead, they focus on developing the habits that lead to winning. Better preparation. Better communication. Better fundamentals. Better decision-making.

When those habits improve, the scoreboard usually takes care of itself.

Operations work much the same way.

Organizations often establish ambitious productivity goals or aggressive performance targets, expecting employees to find a way to reach them. While those goals may create urgency, they don't necessarily equip people with the tools, training, or processes needed to succeed.

Sustainable improvement comes from investing in the behaviors that produce better outcomes.

That means asking questions like:

• Are our associates set up for success?
• Have we removed unnecessary obstacles?
• Are our processes supporting the work instead of slowing it down?
• Do employees have a voice in improving how the work gets done?

When leaders focus on those questions, performance improves naturally.

Another important distinction raised during the discussion was the difference between individual success and team success. In both sports and business, it's easy for people to become consumed by their own metrics. Individuals chase personal achievements while losing sight of the broader objective.

The strongest organizations avoid this trap.

Rather than encouraging departments to optimize their own KPIs independently, they align everyone around a shared outcome: delivering the best possible experience for the customer.

When every team understands how its work contributes to that larger mission, collaboration improves, silos begin to disappear, and operational decisions become easier to make.

Ultimately, goals should serve as guideposts, not finish lines.

Their purpose isn't to limit what teams believe they're capable of accomplishing, it's to inspire better thinking, encourage continuous improvement, and keep everyone moving in the same direction.

The best leaders understand that numbers don't create great performance, the right behaviors do.

And when those behaviors become part of the organization's culture, the numbers become a reflection of success rather than the definition of it.

Final Takeaway

Every operation relies on metrics.

They provide visibility, create accountability, and help leaders understand whether the business is moving in the right direction. Without measurement, continuous improvement becomes nearly impossible.

But metrics were never intended to become the goal.

They were designed to indicate whether the systems, processes, and behaviors within an organization are producing the desired outcomes.

The challenge is that it's easy to become attached to the numbers themselves. Dashboards begin driving conversations. Teams focus on hitting targets. Success becomes defined by what's measured rather than what customers actually experience.

That's when organizations begin optimizing for KPIs instead of optimizing for performance.

The strongest operational leaders take a different approach.

They recognize that every metric influences behavior. They understand that dashboards tell only part of the story. They spend time observing the operation, listening to frontline employees, and asking questions that numbers alone can't answer.

Most importantly, they never lose sight of why a KPI exists in the first place.

A lower cost per pick only matters if it creates a more efficient operation.

A higher fill rate only matters if customers receive what they need when they need it.

Greater productivity only matters if quality, safety, and customer experience improve alongside it.

The best organizations don't chase numbers, they build systems that naturally produce better numbers.

Because in the end, customers don't judge an operation by its dashboards.

They judge it by the experience it delivers.

The most valuable KPI is the one that moves both in the right direction.

Key Takeaways

• Every KPI influences behavior, whether leaders intend it or not.

• Improving a metric doesn't always mean improving the operation.

• Leading indicators help organizations prevent problems before they appear in lagging metrics.

• Customers experience processes and outcomes, not dashboards.

• Metrics should encourage behaviors that strengthen the entire operation, not just one department.

• The best operational improvements come from redesigning systems, not simply raising performance targets.

• Simple, role-specific dashboards often lead to better decisions than measuring everything.

• Great leaders focus on the behaviors that create results, knowing the right KPIs will follow.

• Operational success isn't measured by the numbers on a dashboard, it's measured by the value delivered to the customer.